I am not totally convinced all Maltese investors are always fully aware of the big difference between a secured and an unsecured bond.

When a bond is backed by specific assets, it is termed a secured bond. A secured bond tells prospective investor something of value should be available to bondholders in the event the issuer cannot pay the interest owed or even repay the principal balance.

The coupon (that is, the rate of return) on a secured bond is normally marginally lower than on an unsecured bond.

An unsecured bond is not backed by assets of any kind. If bankruptcy occurs the investor will probably lose all of his/her money. If a company goes belly up and it liquidates its assets in a bankruptcy proceeding, the holders of unsecured debt will probably be left high and dry.

I am not referring to government bonds, which are considered secure by their very nature, but to those issued on a regular basis of late by privately-owned companies.

My bone of contention is that many of these unsecured bonds are being issued by a single subsidiary of large private ‘household name’ companies and my fear is that investors could be under the impression that they are investing in the entire group of companies when, in fact, they are only investing in this single subsidiary.

I appeal to the MFSA to offer more safeguards and guidance to the investor.

Could I, therefore, suggest that, as a first step, when unsecured bonds are issued, it shall become a legal requirement for the issuer to state very prominently (on the application form) that the investor does not have any comfort or guarantees from other companies forming part of the same group should the bond s/he is investing in become insolvent.